Transfer Pricing And The Multinational Corporation

Abstract

This paper discusses the three major methods of determining the transfer price for goods traded within a multinational firm – the comparable uncontrolled price method, the resale price method, and the cost plus method. In addition to tax considerations, five other factors affecting transfer pricing are discussed – foreign government considerations, funds positioning effects, fluctuating foreign currency, foreign import duties, and performance evaluation. Finally, a detailed example of applying the resale price method is provided. Since this is the most difficult method to apply, this example is of particular use to small firms with limited experience in transfer pricing.